HELOC Equity & Rate Estimator (Canada)
Your HELOC Summary
Maximum Total Borrowing Power (80% LTV):
Available HELOC Credit Limit:
Estimated Annual Variable Rate:
Monthly Interest-Only Payment (if fully drawn):
*In Canada, the HELOC component alone cannot exceed 65% of the property value, while the total debt (Mortgage + HELOC) cannot exceed 80%.
Understanding HELOC Rates in Canada
A Home Equity Line of Credit (HELOC) is a powerful financial tool for Canadian homeowners, allowing you to borrow against the equity built in your property. Unlike a traditional mortgage, a HELOC is revolving credit, meaning you can borrow, repay, and borrow again.
How Canadian HELOC Limits are Calculated
Regulatory guidelines in Canada set strict limits on how much equity you can access. There are two primary thresholds to keep in mind:
- The 80% Combined Rule: Your total borrowing (current mortgage balance + HELOC limit) cannot exceed 80% of your home's appraised value.
- The 65% HELOC Limit: The HELOC portion itself can never exceed 65% of the home's value, even if you have no mortgage remaining.
Pricing: Prime + Margin
Most HELOC rates in Canada are variable and tied to the Prime Rate. Lenders typically offer "Prime + 0.50%" or "Prime + 1.00%". If the Bank of Canada adjusts its overnight rate, the Prime Rate changes, and your HELOC interest costs will fluctuate immediately.
Realistic Example Calculation
Suppose you own a home in Toronto worth $1,000,000 with an existing mortgage of $500,000.
- Max Total Borrowing (80%): $800,000.
- Maximum HELOC Cap (65%): $650,000.
- Potential HELOC: $800,000 (Max Total) – $500,000 (Current Debt) = $300,000.
In this scenario, you would qualify for a $300,000 line of credit. If the Prime Rate is 7.20% and your lender margin is 0.50%, your effective rate is 7.70%.
Pros and Cons of HELOCs
Pros: Lower interest rates than credit cards or personal loans, interest-only payment options, and flexibility for renovations or investments.
Cons: Variable rates can increase monthly costs, your home is used as collateral, and the revolving nature can lead to long-term debt if not managed carefully.